Panasonic’s Lumix DMC-TZ7 (or ZS3 as it’s known in North America) continues to be one of the most flexible compacts on the market, and one with very few rivals. Like its predecessor it may not be the slimmest compact around, but considering the huge optical zoom packed within, it remains a remarkable and compelling proposition.

Of course the Lumix TZ5 before it also featured a huge optical zoom range in a compact body, not to mention HD video recording and a lovely 3in / 460k screen, so how does the new model compare? First, the headline zoom range: the earlier TZ5 could hardly be described as lacking at either end of the scale, but Panasonic has now extended both ends of the range. The new 12x zoom on the TZ7 / ZS3 starts at an equivalent of 25mm and ends at 300mm, equipping it with much wider coverage than most compacts, while not compromising on telephoto reach.

You might think such a range in such a small body would result in serious optical compromises, but our results from the TZ7 / ZS3 really were very good. Zoomed-out to 25mm, the frame was impressively sharp into the corners, and while there’s some reduction in contrast when zoomed-in (like all super-zoom lenses), the quality remained very respectable – see our Real-life results for samples. Like other Panasonic compacts we believe there’s some digital correction going-on behind the scenes, but the end result is an image that’s sharp into the corners and almost bereft of coloured fringing or other undesirable optical artefacts.

The second headline feature is AVCHD Lite movie recording. The actual resolution hasn’t increased since the Lumix TZ5 – both models record at a maximum of 1280x720 pixels (720p / 30fps) – but the new TZ7 / ZS3 uniquely offers the choice of encoding it with either the earlier Motion JPEG format, or the newer AVCHD Lite. While the implementation can sometimes feel like the TZ5’s existing movie mode has simply been supplemented with an AVCHD option, there’s compelling reasons to keep the old format available alongside the new.

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Greater efficiencies allow the AVCHD option on the TZ7 / ZS3 to roughly match the quality of the Motion JPEG mode using around half the data – thereby approximately doubling your recording time. Panasonic also offers lower bit rates to further extend your recording time, albeit with reduced quality. Compatible Panasonic TVs can also play the AVCHD files directly from the memory card.

But as anyone who’s tried to work with AVCHD on their computer knows, it’s hardly the most editing-friendly format out there. Enter the Motion JPEG option, which allows much quicker and more responsive editing and recompression performance.

In terms of video quality, the TZ7 / ZS3’s HD files are detailed and lack the visible noise seen on the earlier TZ5; you also now get stereo sound, although the microphones are located quite close together. Panasonic has however gone slightly overboard in terms of processing with sharpening and contrast set fairly high – especially on the AVCHD option. And while you can optically zoom while filming, there can be focusing issues as a result – if the focus is set to continuous, it’ll often search during the zoom, and if it’s fixed the frame will gradually drift out of focus. We also found the stabilisation didn’t respond well to panning. So the TZ7 / ZS3 is no substitute for a dedicated HD camcorder, but it offers a good quality movie mode none-the-less, especially if you can work around the issues; you can see an example on the first page of our review.

In terms of exposure and operation, the TZ7 / ZS3 remains a mostly automatic camera, but at least Panasonic’s Intelligent Auto is one of the best on the market, having an uncanny ability to figure out what you’re trying to take. The TZ7 / ZS3 enhances this further with Face Recognition, which can register and remember a handful of regular subjects, naming them on-screen and giving them focus priority – in practice it works too.

The additional Megapixel is an unnecessary but inevitable move, although noise levels are roughly the same as its predecessor and rival compacts. So like most small-sensor models the best results are had below 200 ISO, and if you’re really looking, you’ll see a fine smattering of noise even at the lowest sensitivities.

Finally, the 3in / 460k screen may be the same as its predecessor, but it still delivers a great quality, detailed image, although again the resolution benefit appears to be in playback only. It should also be noted that the TZ7 / ZS3’s body may now house a slightly longer zoom, but it’s actually a little thinner and lighter than the TZ5, while additionally boasting an HDMI port. Which now brings us to the comparison against its predecessor, the sister model, and a brand new rival.

Compared to Panasonic Lumix DMC-TZ5

We’ll start with the TZ7 / ZS3’s predecessor, the best-selling Lumix TZ5, launched exactly one year before it. The Lumix TZ5 features a 10x optical zoom range that’s equivalent to 28-280mm, a 3in screen with 460k resolution, HD movie recording in 720p, and a powerful Intelligent Auto mode. Both cameras also employ physically larger sensors allowing them to maintain the angle of view and avoid cropping whether shooting in 4:3, 3:2 or 16:9 aspect ratios.

The TZ7 / ZS3 keeps the screen, the multiple aspect shooting and 720p movies, but enhances the other features. Most notably the lens is extended at both ends to a 12x / 25-300mm equivalent range. Secondly the HD movies may be the same resolution and frame rate as before, but they now look cleaner and can be encoded in either the older Motion JPEG or more efficient AVCHD Lite formats, along with stereo sound. The Intelligent Auto mode is now complemented by Face Recognition, there’s an HDMI port, an extra Megapixel of resolution and the macro mode also focuses a little closer at 3cm. Finally, the body itself is a little thinner and lighter.

An unnecessary extra Megapixel aside, they’re all worthy enhancements, especially the wider and longer zoom, and the movie mode which consumes less memory while maintaining similar quality. If these are important to you, then it’s well worth going for the TZ7 / ZS3, but if you’d be happy with a 28-280mm 10x range and videos encoded in Motion JPEG alone, then the older Lumix TZ5 remains a great choice. Over time it’ll be phased-out by the TZ7 / ZS3, but until then it’s well worth keeping an eye on the prices. Sometimes the older model actually becomes more expensive as stocks dwindle, but at other times it falls to become a bargain buy. See our Panasonic Lumix DMC-TZ5 review for more details.

Compared to Panasonic Lumix DMC-TZ6 / ZS1

Like its predecessor, the Lumix TZ7 / ZS3 was launched alongside a cheaper version with a less sophisticated feature set – in this case it’s the Lumix TZ6 / ZS1. Both models share the same body and the same 12x 25-300mm optical zoom range. They also share the same 10.1 Megapixel resolution when shooting 4:3 images, although employ different sensors. The TZ7 / ZS3’s physically larger sensor maintains the angle of view when shooting at wider aspect ratios, whereas the TZ6 / ZS1’s sensor simply crops the image, reducing the coverage and total pixels. But set them both to 4:3 and they’ll shoot 10.1 Megapixel stills with the same coverage.

Beyond this, the TZ6 / ZS1 is fitted with a slightly smaller and less detailed 2.7in / 230k screen and can only record standard definition video up to 848x480 pixels with mono sound, encoded using the Motion JPEG format. It’s also missing the HDMI port and Face Recognition features of the TZ7 / ZS3, although the other aspects of Intelligent Auto remain present including normal Face Detection.

If it’s the 12x optical zoom that most attracts you and you’re not bothered about HD movie recording, HDMI output, or the luxury of a bigger, more detailed screen, then the TZ6 / ZS1 is a good choice. It gives you the compelling lens range and compact body of the TZ7 / ZS3 without its extra frills at a more affordable price. Do also compare closely against the earlier TZ5 though which may 'only' have 9 Megapixels and a 10x zoom, but does have a bigger and more detailed screen, along with HD movies.

Compared to Canon PowerShot SX200 IS

Up until recently, Panasonic had the pocket super-zoom market pretty much to itself – the earlier TZ5 may have been successful on its own merit, but it certainly didn’t do any harm that there weren’t any serious rivals. In 2009 though, the latest Lumix TZ7 / ZS3 finds itself up against a major rival in the shape of Canon’s PowerShot SX200 IS. Both cameras pack 12x optical zooms, 3in screens, 720p movies and HDMI ports into compact bodies which measure roughly the same size. As such they’re clearly pitched directly against each other, but look closely and there’s a number of key differences.

In its favour, the PowerShot SX200 IS sports far greater manual exposure control with Program, Aperture, Shutter Priority and full Manual modes in addition to the usual Auto and Scene preset options. It features two additional Megapixels, a higher bit-rate in its movie mode and a neat self timer mode which exploits face detection to wait until the photographer enters the frame before taking the shot, not to mention blink detection which can warn you if a subject has their eyes closed in a photo.

These advantages don’t necessarily make the SX200 IS the better choice though. The Lumix TZ7 / ZS3 has a wider zoom range of 25-300mm which is arguably a little more useful than the 28-336mm of the Canon. More importantly, it can optically zoom while filming video (unforgiveable absent on the SX200 IS) and offers a choice of lower bit rates or encoding for longer recording times or easier editing. Both screens may be 3in in size, but the TZ7 / ZS3’s boasts double the total pixels for much more detailed playback. The TZ7 / ZS3 may not have a face-based self-timer or blink detection, but it can recognise and store a handful of faces for priority focusing; the body is also a few mm thinner and there’s a burst mode which may greatly reduce the quality, but can shoot at up to 10fps.

Panasonic may no longer have the compact super-zoom market to itself, but the latest Lumix TZ7 / ZS3 remains a highly compelling camera that’s likely to sell by the bucket-load. It takes the already excellent Lumix TZ5 with its 720p video, 3in / 460k screen and multiple aspect recording, and enhances it with a wider and longer lens (with impressive quality), more efficient video recording (while retaining the older mode for easier editing), improved face detection, an HDMI port and an extra Megapixel.

It’s an impressive specification, but this time Panasonic finds itself up against an equally compelling rival from Canon. Then there’s the TZ6 / ZS1 and earlier TZ5 models which may not boast the latest features, but still deliver long zooms in small form factors at more affordable prices. As always, compare the features and pricing carefully.

Ultimately while there’s now more options to compare, the Lumix TZ7 / ZS3 remains a great choice, updating the compelling pocket super-zoom concept with the latest features. In short, one of the best compacts on the market just got better, and as such we can easily award the Lumix TZ7 / ZS3 our Highly Recommended rating.